Churn and Burn: Why Medicare Advantage Patients Walk Away

"Every five years, as many as half of MA enrollees switch from one MA plan to a different MA plan, and one in ten exit MA for traditional fee-for-service Medicare."

More than half of eligible Medicare beneficiaries participate in Medicare Advantage (MA) plans, so the annual churn of those entering and leaving comes with costs. Financial, of course, and less noticed, but more important, loss of continuity in care for beneficiaries and plans. That gap in continuity can result in fragmented care and provides a perverse incentive to MA plans. Knowing that a high-cost beneficiary may leave within a few years reduces the need to create care programs that promote their health and reduce “maintenance” costs. 

A new study in Health Affairs examines why Medicare Advantage (MA) beneficiaries disenroll from their plans, either by switching to a different MA plan or reverting to traditional fee-for-service Medicare. Are disenrollment rates due to dissatisfaction with restricted access, quality, or out-of-pocket costs? Using data from the 2015–2020 Medicare Current Beneficiary Survey, a nationally representative survey of Medicare beneficiaries that collects data on health status, access, and satisfaction with care, researchers tracked whether individuals stayed in the same MA plan (“stayers”) or left (”leavers”) either for another MA plan or traditional Medicare the following year.

The primary focus was on whether beneficiaries reported difficulty accessing the medical care they needed. Secondary factors included care costs and quality. Cost measures included self-reported satisfaction with their out-of-pocket expenses, as well as a measure of “plan generosity” based on the plan’s monthly contributions to healthcare services. Quality measures included self-reported satisfaction as well as the increasingly controversial CMS star ratings. [1] The research dataset is limited by self-reported measures and an inability to directly measure healthcare use, thereby precluding the collection of explicit information on the causes of access difficulties.

• Access to Care - 9.2% of leavers reported trouble getting needed care vs. 5.5% of stayers. Lack of access also influenced leaving for another MA plan (1.33 higher risk) than exiting MA entirely for traditional Medicare (a 3.62 higher risk)
• Quality of Care - 6.0% of leavers were dissatisfied with overall quality vs. 3.3% of stayers. Enrollees in low-rated plans (2 or 3 stars) were more than 75% likely to leave.
• Cost of Care - Low plan generosity, defined as high out-of-pocket costs, was linked to a 1.47× higher risk of leaving.
• Health Status Differences - Dissatisfaction with access, cost, and quality was more common among those in fair/poor health who needed the most services and specialized care. Those in poor health had twice as much trouble accessing care and were three times more dissatisfied with the quality of the care and its cost.
• Difficulty with access was a stronger predictor of transitioning to traditional Medicare than simply switching Medicare Advantage (MA) plans. Quality and plan features may lead to switching between Medicare Advantage (MA) plans; however, significant access issues are more likely to drive beneficiaries back to traditional Medicare.

"We found that the ability to access and receive high-quality care, more than perceived burdens of out-of-pocket costs, contributed to MA plan disenrollment."

These findings underscore the ongoing concerns about whether Medicare Advantage (MA) plans adequately serve beneficiaries with high healthcare needs, who are more likely to experience issues with access and quality. As with most studies, it raises more questions than providing answers. Why those who are in poor health experience access and quality issues remain unexplored, an unknown known. 

“Our findings identify but do not fully explain beneficiaries' issues with access to and quality of care that drive MA plan disenrollments. One possibility involves favorable selection behavior, in which MA attracts healthier enrollees and drives away costlier ones through plans' management of benefit and network designs, drug formularies, and prior authorization.”

A common sense explanation would include the fact that those in poorer health interact with the health system and MA plans more frequently and, therefore, have more experience with the quality of care they receive as well as the “rationing by hassle” that MA plans are known for, e.g., algorithmic pre-determinations of the need for care.

The media has reported on the concerns and interventions around “access friction,” the slow-rolling of prior authorizations, and the narrow provider networks that can make specialty care an out-of-network expense. There continues to be litigation around CMS star ratings, which are easily gamed and inflated. However, little mention is made of a perversely incentivized business strategy.

Behind the scenes, Medicare Advantage plans quietly bank on churn. Because half of all enrollees switch plans within five years—and one in ten bolts for traditional Medicare—insurers face a short planning horizon: why pour money into intensive case-management programs when high-need patients are likely to leave before the savings materialize? Risk-adjustment payments fatten revenues simply for labeling someone “sicker,” making careful up-coding more profitable than building robust specialist networks. Generous star-rating bonuses (until their 2024 overhaul) further masked access problems, leaving 90 percent of members in ostensibly top-tier contracts. And when prior-auth roadblocks or narrow networks frustrate costly patients, those beneficiaries can—and do—exit, shifting their expensive care back onto the fee-for-service system. The perverse yet rational result: benefit packages brimming with low premiums and gym perks to lure healthy seniors, while bureaucratic hurdles and thin networks nudge the sickest to churn away.

[1]Low-quality plans were defined as those with CMS star ratings between 2 and 3.5, although most enrollees were in higher-rated plans.

Source: Medicare Advantage Plan Disenrollment: Beneficiaries Cite Access, Cost, And Quality Among Reasons For Leaving Health Affairs DOI: 10.1377/hlthaff.2024.01536